Review faults Navy oversight of "audit-readiness" contractors

Irony alert: In its quest to improve management of its finances, the Navy is having trouble managing the contractors who have received tens of millions of dollars to help the service meet congressionally imposed “audit-readiness” deadlines.

That’s the takeaway from a newly released review by the Defense Department’s inspector general. One finding: The Navy’s Fleet Logistics Center office in Philadelphia spent $12.6 million on two task orders, “but did not adequately track whether the contractor met the requirements.”

The report highlights other shortcomings in how Navy employees oversaw the contracting work, including failing to devise quality assurance plans for some task orders and not recording when “deliverables” were turned in. The findings appear to have gotten no serious argument from either Naval Supply Systems Command—which includes the Fleet Logistics Center—or the Navy’s Office of Financial Operations, which agreed to make improvements.

The IG review also serves as a reminder that there is some serious taxpayer money involved in meeting the audit-readiness mandate. As of the end of fiscal 2012, the Navy had obligated about $123.3 million worth of contracts to four heavyweights of the consulting world—Accenture, Booz Allen Hamilton, Deloitte and KPMG—with almost $51 million spent. The review does not say which firm’s task orders did not get adequate oversight.

By law, the services and the Defense Department are supposed to have auditable financial statements in place by September 2017. While the Marine Corps recently received a clean opinion on its fiscal year 2012 schedule of budgetary activity, the Navy’s general fund financial statements for both FY12 and FY 2013 were—once again—unauditable, according to a separate review.